Prime Minister Justin Trudeau’s visit to India this week will reinforce and underline our growing people-to-people ties. The economic relationship is less buoyant, but if Indian Prime Minister Narenda Modi can deliver on his promised domestic reforms, there is the potential for more two-way trade and investment.

With stops in Agra, Amritsar, Ahmedabad, Mumbai, as well as New Delhi, it will be a rare session that does not include some reference to family living or studying in Canada.

The Indian diaspora includes several members in the Canadian Parliament, with four members in the Trudeau cabinet. Nearly 4 per cent of Canadians claim Indian decent, with 40,000 Indians migrating to Canada last year. The 124,000 Indians studying in Canada are our second-largest group of foreign students. No surprise that tourism is also on the rise, with more than 210,000 Indians visiting Canada last year. There are daily and non-stop flights.

India definitely deserves Canadian attention.

India will soon surpass China in population, with one-sixth of humanity. It is also the world’s largest democracy, which is a cacophony of caste and creeds. The two Prime Ministers will empathize over the challenges of managing federations with strong sectional and regional pressures. Some of these, such as the Sikh separatist movement, play into Canadian affairs.

At the World Economic Forum in Davos last month, Mr. Modi was forceful in his embrace of globalization. He described his “New India” reform agenda and its pillars of structural reform: technological governance; physical infrastructure; business facilitation; and inclusive development. Designed to give “good administration and better amenities,” Canada needs to identify the niche opportunities within each pillar.

Trade and investment will figure in every discussion. Investment from Canadian pension funds in real estate and other sectors has picked up in the past couple of years.

But Canada and India are still some distance from long-promised deals on foreign investment and closer economic relations.

The foreign-investment protection agreement negotiated by the Paul Martin and Stephen Harper governments that was concluded in 2007 has yet to be implemented. Free-trade negotiations began in 2010. The six-month “road map” to its achievement, that Mr. Harper and Mr. Modi enthused about during the Indian Prime Minister’s Canadian visit in April, 2015, has yet to materialize.

Much of the problem lies, as the World Bank consistently reports, with India’s trade restrictiveness. Mr. Modi talks a good show on reform and, while he is making some progress, the structural impediments are deep and entrenched.

There is also, notwithstanding Mr. Modi’s declaration in Davos, Indian protectionism.

The imposition late last year of a 50-per-cent import tariff on peas and a 30-per-cent tariff on chickpeas and lentils should be high on Mr. Trudeau’s discussions with Mr. Modi. Agricultural sales to India are a major market, especially for Prairie farmers.

Mr. Trudeau will likely get a receptive hearing on climate and the progressive trade agenda that can be parleyed into useful initiatives.

Mr. Modi will raise Indo-Pacific security and likely ask about Canadian capacity and capabilities. Indian policy under Mr. Modi has shifted from “Look East” to “Act East.” His “Neighbourhood First” policy is roughly analogous to the Trudeau government’s new “Strong, Secure, Engaged” defence policy. At last month’s Association of Southeast Asian Nations forum, there were discussions about the “congagement” – containment and engagement – of China. Mr. Trudeau should listen to Mr. Modi’s perspective.

With the Trans-Pacific Partnership now a reality and likely to be implemented later this year, our trade in the Pacific will only increase. It will oblige more attention and commitment to Indo-Pacific security.

The tempo of Indo-Pacific activity by our Esquimalt-based warships has picked up. HMCS Chicoutimi, one of our Victoria-class submarines, is completing a nearly six month successful Pacific exercise that also took it to Japan. If we want to be seen as a serious Indo-Pacific partner, the current tempo will be seen as the bare minimum.

Mr. Trudeau’s India visit is his longest yet to a single country. The Indian backdrop will provide a spectacular picturesque travelogue against a celebration of family ties. But real success will also require serious and continuing conversations on trade and security.

On today’s Global Exchange Podcast, we speak with the Indian High Commissioner to Canada, Vikas Swarup. Join Colin and High Commissioner Swarup for a discussion on the High Commissioner’s career, his impressions of Canada, the importance of Canada-India relations, and the significance of Prime Minister Justin Trudeau’s upcoming visit to India.

Participant Biographies

Colin Robertson (host): A former Canadian diplomat, Colin Robertson is Vice President of the Canadian Global Affairs Institute.

Prime Minister Justin Trudeau is gearing up for four days of critical meetings with lawmakers and business leaders as he heads out on yet another trade and investment mission to the U.S.

But Trudeau has one closed-door discussion planned that’s certain to get more attention than the rest.

On Thursday, he will be meeting with Jeff Bezos, CEO of Amazon. The tech giant is in the middle of its search for a second headquarters — and Toronto is on the short list.

Trudeau will be under pressure to make a strong pitch on Toronto’s behalf during his face-to-face meeting with Bezos.

Amazon plans to spend up to $5 billion US on its second headquarters, which it says will create 50,000 new high-paying jobs.

More than 200 cities in Canada and the U.S. bid for the facility, but Toronto is the only Canadian city still being seriously considered for the new location.

Canada’s largest city is up against several major U.S. hubs, including Boston, New York and Chicago.

Familiar trade pitch

The Bezos meeting is just one aspect of Trudeau’s trip south of the border.

Over the next four days, he will visit Chicago, San Francisco and Los Angeles to promote NAFTA and the importance of the Canada-U.S. trading relationship.

Former Canadian diplomat Colin Robertson calls these types of missions essential to the Canada-U.S. relationship.

“I think the one thing Donald Trump has taught us is that you can’t take the U.S. for granted,” he told CBC News.

U.S. President Donald Trump welcomes Trudeau at the White House on Oct. 11, 2017. ‘The one thing Donald Trump has taught us is that you can’t take the U.S. for granted,’ former Canadian diplomat Colin Robertson said of the current U.S. president. (Jonathan Ernst/Reuters)

“We do not make enough trips into the United States, given the relative weight of the United States and its importance on the Canadian economy.”

The pitching begins in Chicago, where Trudeau will deliver a keynote speech today at the University of Chicago and participate in a discussion with David Axelrod, former U.S. president Barack Obama’s chief election strategist.

Before the event, he will sit down with several political leaders, including Illinois Gov. Bruce Rauner and Chicago Mayor Rahm Emanuel, who also served as Obama’s first chief of staff.

Trudeau is expected to use the meetings to remind U.S. lawmakers of the importance of NAFTA at a critical point in the re-negotiation process.

The sixth round of NAFTA talks ended in Montreal last month with all sides agreeing that progress has been slow.

Since then, new signs of hope have emerged that suggest a deal may be possible.

Canada’s ambassador to the U.S., David MacNaughton, told an audience in Ottawa on Monday that he’s pressuring negotiators to wrap up discussions in the next two months.

On Tuesday, U.S. Secretary of Agriculture Sonny Perdue told a U.S. House of Representatives committee that he believes a deal could be reached by December.

‘Go north’

Trudeau will shift his focus to the tech sector on Thursday as he heads to San Francisco, where he will meet with Bezos. But he also will sit down with other influential business leaders, including the CEOs of online shopping giant eBay and pharmaceutical developer Amgen.

The tech sector leg of the visit wraps up with a dinner at the Business Council to discuss new investment opportunities in Canada.

Trudeau’s pitch likely will include the fact that Canada has joined the new Comprehensive and Progressive Trans Pacific Partnership (CP-TPP). The U.S. did not sign on to the pact, which also includes Japan and Australia.

“I think this might be of interest to some American exporters,” said Michael Kergin, Canada’s former ambassador to the U.S. “They can use some subsidiaries in Canada to work through the Asian markets as well.”

Kergin also said the business tax cuts introduced by U.S. President Donald Trump last month won’t necessarily hurt Trudeau’s pitch to the high tech sector.

“Knowing where you can get good markets and good people to work with you … I think is more important than the tax issue,” he said.

Trudeau also may look to urge Canadians working in tech industries in the U.S. to start coming home.

“There’s a ‘Go north’ campaign on right now,” Robertson said. “All the bright young engineers from Sheridan College that worked at Pixar … and from Waterloo that went down to Silicon Valley. If we can bring some of them back … that would be great for Canada.”

While in San Francisco, Trudeau will meet with more lawmakers, including California Gov. Jerry Brown.

Trudeau ends his trip with two days in Los Angeles. While there, he will deliver a second keynote address — this time to a primarily Republican audience at the Ronald Reagan Presidential Library and Centre for Public Affairs.

The prime minister is set to meet with some of the most influential leaders in the tech industry as he launches a four day trade and investment mission to the U.S. (Rob Easton/CBC)

Among the spaghetti bowl of trade deals currently on the Canadian menu, associate membership in the Pacific Alliance should be an easy choice.

The government and House of Commons International Trade Committee are currently holding consultations. Here is what they should consider:

The Alliance members – Chile, Colombia, Mexico and Peru – are business-minded. They embrace the rules-based, democratic order. Their economic well-being affects the economic health of Canadian companies, especially in resources, infrastructure and finance.

The “Pacific pumas” have more than 221 million consumers. Their combined GDP is equivalent to the world’s sixth-largest economy. Canadian investment in the alliance is estimated at $50-billion.

The alliance’s goal is to achieve free movement of goods, services, capital and people. The members are integrating their stock markets, and are even sharing embassies in certain countries.

Canada already has free-trade agreements with individual alliance members, so some ask why we should become an associate member.

The first answer is that we must take our opportunities when they come.

We would have first-mover advantage within the best trade agreement in the Americas, just as we will have with trans-Pacific countries through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and trans-Atlantic through the Comprehensive Economic and Trade Agreement (CETA). That means a bigger payoff as we establish a customer base ahead of the opposition. The cumulative rules of origin would weave the individual free-trade agreements (FTAs) with alliance nations into a seamless web. That would mean improved competitiveness of Canadian products.

Second, the Pacific Alliance is consolidating itself as a platform for economic integration within the Americas.

Canada would become a leader within the Pacific Alliance by virtue of being the biggest economy in the most liberalized caucus of trade nations in the world.

While the alliance is mostly about trade, it is also about building deeper co-operation through regulatory integration and addressing emerging issues such as the digital economy. What better place to advance the progressive trade-agenda goals in gender, labour, environment and small and medium-sized enterprises, than in this group of progressive democracies. And we have already begun. Last year, the Canada-Chile FTA was revised to include gender rights.

Third, stronger links with the alliance would give us better place and standing in the Americas. History and migration have given us strong links across the Atlantic and the Pacific. Our ties south of the Rio Grande, by comparison, are less so.

The Pacific Alliance commitment to transparency and anti-corruption within Latin America is the better model than its protectionist counterpart, Mercosur – Argentina, Brazil, Paraguay, Uruguay – and a contrast to the periodic illiberal governance in places like Venezuela. Canadian participation in the alliance would reinforce its attraction to the rest of the Americas.

But there are potential challenges to membership. For example, the alliance’s mobility provisions – free movement among the member states – might not work for Canada.

One option could be to negotiate trusted-traveller programs for business. Our guest-worker program with Mexico could serve as a model. Operating for more than 40 years, it now brings more than 22,000 seasonal workers to Canada annually.

The provinces must be active partners in considering the Pacific Alliance, just as they have been in the negotiations of the CETA, CPTPP and the talks to renegotiate the North American free-trade agreement (NAFTA). Trade is increasingly less about tariffs at the border and more about standards and regulations in areas of provincial or shared responsibilities.

Trade liberalization acts as a catalyst to domestic economic restructuring. Most are winners, but there are also losers. We have developed institutions between the levels of government to find and implement solutions, including adjustment assistance and retraining. We must continue and refine this.

Against a backdrop of “America First” protectionism and no foreseeable conclusion to the zombified Doha round of talks at the World Trade Organization, we need alternative markets. Middle power groupings, such as the Pacific Alliance, pick up the slack and help sustain the rules-based trading order.

Other key Pacific partners – Australia, New Zealand, Singapore and South Korea – are actively considering associate membership. It is always better to be a driver setting the course in the front seat, rather than a late passenger along for the ride. Canada should move now on associate membership in the Pacific Alliance.

The Vice President of the Canadian Global Affairs Institute says the fact that the renegotiation of the North American Free Trade Agreement will continue is cause for renewed optimism.

With round six of the renegotiation of the North American Free Trade Agreement having concluded in Montreal negotiators are now preparing for round 7 next month in Mexico.

Colin Robertson, Vice President and a Fellow of Canadian Global Affairs Institute. says what is significant coming out of the Montreal Round is that they’re still standing and there will still be negotiations.

There was much concern going into this round that because we were going to taken on those provision relating to importantly dispute settlement, government procurement, rules of origin as it relates to autos, the sunset clause so called, if we were not able to make progress then President Trump or United States Trade Representative Robert Lighthizer might pull the plug.

The fact is we’re still negotiating and there’s going to be another round, this is all good news. I would say that going into this round there was fair bit of pessimism about whether this might be the end. But in fact we’re still standing and going forward.

One of the more significant things was that, in Montreal ten members of Congress led by the Chair of the Trade Committee within the House of Representatives was present and they acted, I think, as a kind of a positive force saying we who represent our constituents would like to see the NAFTA reformed but we would like to see the NAFTA continue.

~ Colin Robertson, Canadian Global Affairs Institute

Robertson notes last week President Trump was in Davos, Switzerland where he delivered, by Trump standards, a fairly moderate speech where he stated, “Yes, America first but not America alone” and he made no reference to the North American Free Trade Agreement. Round seven of the NAFTA renegotiation is set for late next month in Mexico before heading back to Washington in March for what is currently scheduled as the final round of negotiations.

The Vice President of the Canadian Global Affairs Institute says the fact that the renegotiation of the North American Free Trade Agreement will continue is cause for renewed optimism.
With Round 6 of the renegotiation of the North American Free Trade Agreement having concluded in Montreal negotiators are now preparing for round 7 next month in Mexico.
Colin Robertson, Vice President and a Fellow of Canadian Global Affairs Institute. says what is significant coming out of the Montreal Round is that they’re still standing and there will still be negotiations.

Clip-Colin Robertson-Canadian Global Affairs Institute:
There was much concern going into this round that because we were going to taken on those provision relating to importantly dispute settlement, government procurement, rules of origin as it relates to autos, the sunset clause so called, if we were not able to make progress then President Trump or United States Trade Representative Robert Lighthizer might pull the plug.
The fact is we’re still negotiating and there’s going to be another round, this is all good news.
I would say that going into this round there was fair bit of pessimism about whether this might be the end.
But in fact we’re still standing and going forward.
One of the more significant things was that, in Montreal ten members of Congress led by the Chair of the Trade Committee within the House of Representatives was present and they acted, I think, as a kind of a positive force saying we who represent our constituents would like to see the NAFTA reformed but we would like to see the NAFTA continue.

Robertson notes last week President Trump was in Davos, Switzerland where he delivered, by Trump standards, a fairly moderate speech where he stated, “Yes, America first but not America alone” and he made no reference to the North American Free Trade Agreement.
Round 7 of the NAFTA renegotiation is set for late next month in Mexico before heading back to Washington in March for what is currently scheduled as the final round of negotiations.
For Farmscape.Ca, I’m Bruce Cochrane.

On January 23, while NAFTA negotiations between Canada, Mexico and the U.S. were underway in Montreal, and world leaders were meeting at the World Economic Forum in Davos Switzerland, a deal was reached for the Comprehensive and Progressive Trans-Pacific Partnership. This deal includes both Canada and Mexico but not the U.S.. The Agenda discusses how the newly minted CPTPP agreement will impact NAFTA negotiations. Steve Paiken talks with Mark Warner and Colin Roberton

]]>http://www.colinrobertson.ca/?feed=rss2&p=20750Crunch Time for NAFTA: A Test for the USAhttp://www.colinrobertson.ca/?p=2068
http://www.colinrobertson.ca/?p=2068#commentsMon, 22 Jan 2018 01:14:03 +0000http://www.colinrobertson.ca/?p=2068

The NAFTA negotiations this week in Montreal will give us a good sense of whether a new agreement is possible. Canada and Mexico are coming to the table with ideas on the “poison pills” but is the United States ready to negotiate?

The test will come on three issues:

– Can we preserve dispute settlement as a check against unfair protectionism?

– Can we find an equitable formula around trilateral content rules for cars, our most traded commodity?

– Will government procurement stay open to all three nations?

If we cannot resolve these issues, then we have to look to Plan B, life without the North American free-trade agreement.

Foreign Minister Chrystia Freeland’s “hope for the best, prepare for the worst” is a fair characterization of NAFTA’s prospects. The Trump administration continues to ramp up protectionist actions against foreign competition. In recent months, the United States has hit Canada with punitive tariffs on lumber, jets and now newsprint.

U.S. President Donald Trump’s repeated threats to rescind NAFTA is galvanizing hitherto-silent U.S. support into action. The farm community and business, two vital groups in the Trump coalition, want NAFTA improved, not rescinded. Surveys show a majority of Americans like NAFTA. Senators and members of the House of Representatives, especially those in the Midwest and from Texas, are now pressing the President to do no harm to NAFTA.

Canada and Mexico have launched unprecedented outreach campaigns. Canadian envoys have met with more than 65 governors and lieutenant-governors and more than 265 congressmen. We are finding allies. We will need them if Mr. Trump rescinds the agreement or if any new deal reaches Congress.

Canada and Mexico must stay engaged in what should become a permanent campaign to cultivate the biggest market in the world.

But the future of NAFTA now depends on the outcome of the American internal debate.

Canadians faced their moment of truth on trade in 1988. We fought an election over closer economic relations with the United States. It brought prosperity, not, as the critics warned, a loss of sovereignty. Mexicans faced a similar moment in 1994 when they embraced the NAFTA.

For both Canada and Mexico, freer trade proved that we could compete, not just with the U.S., but internationally.

Freer trade also became a catalyst for domestic economic reform.

For Canada, the restructuring included the introduction of a national value-added tax, the GST. Federal and provincial governments cut their deficits. For Mexico, NAFTA restructuring supported democratic change in 2000 after 71 years of one-party rule. More recently, it helped spur the “Pacto por Mexico” reforms to education, finance, labour and energy.

For Americans, NAFTA is a litmus test of its place in the world. Will they replace the rules-based order, created and sustained by the United States for 70 years, with Mr. Trump’s vision of America First? Will Americans set aside their traditional generosity towards other countries with one based on mercantilism and beggar-thy-neighbour?

For the first time, the most important global economy wants to renegotiate a trade agreement by increasing trade barriers so as to balance its trade. It’s a world of big rolling over small. Middle powers like Canada and Mexico need to push back.

Previous U.S. administrations, both Republican and Democrat, saw U.S. internationalism not as an act of charity, but as reflecting U.S. values and principles. As practised by Roosevelt through Reagan and Obama, the United States used its weight to better the global condition, willing to give more than it received. This is the “indispensable nation” that Ms. Freeland described when she laid out the Trudeau foreign policy last June. She described a United States that sustains the global order, for the greater global good, through a network of alliances, trade agreements and international institutions.

Mr. Trump’s “America First” breaks with this American tradition. Will Congress and the courts go along with Trumpism? While Canada and Mexico prepare for the worst, we must stay engaged with the many Americans who see the world, and America’s place in it, differently than Mr. Trump. Ultimately, Trumpism is a test of how Americans see themselves and their place in the world.

Canada will be hosting an annoyed and angry United States as the sixth round of talks in the North American Free Trade Agreement renegotiation unfold over the coming week.

The Trump administration is making known its displeasure about Canada’s contributions to date and demanding progress over the marathon 10-day session.

Multiple sources aware of the U.S. administration’s views say the acrimony has a variety of causes, including Canada’s recent decision to file a sweeping complaint about U.S. trade practices at the World Trade Organization and its pursuit of a progressive trade agenda that includes Indigenous and labour provisions.

The rhetoric around its implacable rejection of the most controversial U.S. positions — raising continental content provisions on automobiles, scrapping a dispute resolution mechanism, limiting Canadian access to U.S. procurement, and instituting a five-year sunset clause — as well as bitterness over apparent leaks are all fuelling the U.S. animosity towards Canada, say sources.

Sources familiar with the Canadian position dismiss all that and say the tone at the negotiating table is professional and cordial, and that Canada is prepared to table counter-proposals in order to make progress.

They say Canadian negotiators are making constructive proposals to find common ground with the Americans on what some have called poison pills designed to kill the deal.

Indeed, Canada, the U.S. and Mexico are showing signs they all want to see tangible progress in this round in order keep the negotiations on track, and discourage U.S. President Donald Trump from announcing his intent to withdraw from NAFTA.

It will be another week before Foreign Affairs Minister Chrystia Freeland, American counterpart Robert Lighthizer and Mexico’s Ildefonso Guajardo arrive in Montreal on Jan. 29 to close the extended round that gets underway earlier than planned on Sunday.

The way some see it, Lighthizer is in no hurry to come back to Canada.

“The feeling of ill will between Bob Lighthizer’s office and the Canadians — I don’t think you can underestimate it,” said Sarah Goldfeder, a former U.S. diplomat who now represents American clients in an Ottawa consultancy.

“He’s extremely frustrated with China and Canada,” added Goldfeder.

“Those are the two countries he thinks are being most unfair to the United States … Those are the ones taking up a good chunk of his time, and not in positive ways.”

Goldfeder noted that when Freeland went to Washington two weeks ago she met Commerce Secretary Wilbur Ross and members of Congress — but not Lighthizer.

When Guajardo visited later in the month, Lighthizer’s door was open to him, she said.

Colin Robertson, a retired diplomat with extensive experience in the U.S., said the body language between Lighthizer and Freeland is “terrible,” which is telling.

“He’s a bully and she gets under his skin,” said Robertson. “She and Guajardo are amigos. No one would say that about Freeland and Lighthizer.”

Canadian officials say Freeland and Lighthizer intend to meet this week while the two are in Davos, Switzerland for the annual meeting of the World Economic Forum.

Lighthizer isn’t willing to blow up NAFTA over the WTO challenge, but Canada should brace for some bilateral retaliation. Meanwhile, his office isn’t interested in the Canadian progressive trade agenda — entrenching Indigenous, gender and workers’ rights issues in the pact — because it has the whiff of Canada dictating social policy to the U.S., Goldfeder said.

Lori Wallach, the director of Public Citizen’s Global Trade Watch, a group normally at odds with the Republicans, was also critical of the Canadian posture.

“Canada is 100 per cent not engaged. Mexico started engaging in the last month or so,” said Wallach, who knows Lighthizer.

”Probably after the Montreal round, that increases the prospect that there could be a notice of withdrawal.”

Ottawa is defensive. The characterization of Canada as obstructionist is nonsense, and the product of strategic leaking of information, according to another official familiar with the content of talks, and who agreed to speak anonymously citing the sensitivity of the ongoing negotiations.

The official said Canadian and American negotiators, as well as their Mexican counterparts, know each other well and are working methodically in the 30 separate negotiating rooms to make incremental progress.

The official pointed to Freeland’s Jan. 11 comments at the Liberal cabinet retreat in London, Ont. as evidence Canada is doing some “creative thinking” about how to deal with “unconventional” U.S. proposals.

The complaints about Canada’s progressive trade agenda are also a bit rich, the official said, because the real obstacles are more fundamental — the American poison pill proposals that wouldn’t fly in any trade negotiation.

In particular, the official cited the U.S. proposal to ditch the dispute resolution mechanism, saying Americans remember full well that former Progressive Conservative prime minister Brian Mulroney considered that idea a deal breaker during the original Canada-U.S. free trade talks in 1988.

Freeland told CTV’s Question Period on Sunday that the progressive chapters on labour, gender, environment and Indigenous issues are not a problem. She said the Indigenous chapter would be discussed for the first time in Montreal.

Assembly of First Nations Grand Chief Perry Bellegarde said it’s about time — he has pushed Freeland hard on the issue in recent months as part of her NAFTA advisory committee. Bellegarde told The Canadian Press he hopes the Americans and Mexicans support a chapter affirming Indigenous Peoples’ inclusion in the economy.

“Canada is supporting that,” he said.

“Tuesday will be the first formal response by U.S.A., Mexico to that new chapter, and so it’s very important.”

Today’s NAFTA talks are unusual because Canada is being told it needs to give up benefits or lose access to its fundamental trading partner, said Eric Miller, head of the Rideau Potomac Strategy Group in Washington.

“Canada’s economic livelihood is on the line,” said Miller, a former Canadian official who worked on the auto bailout.

“One should expect Canada to be very focused on it, and to react very strongly.”

The Canadian Chamber of Commerce is suggesting the more than 200,000 companies in its network renew any permits required to do business in the United States sooner than later in case U.S. President Donald Trump’s administration scraps the 24-year-old North American Free Trade Agreement (NAFTA) between Canada, the United States and Mexico.

“We all live in hope that common sense will prevail at the end of the day,” chamber president and chief executive officer Perrin Beatty, a former Canadian cabinet minister, said in an interview with Xinhua Friday.

“However, we’re dealing with an administration that is very nativist and that is talking about putting impediments in the way of trade, which is not what we’re doing in Canada. We see engaging American businesses as a positive thing.”

Next Tuesday, American, Canadian and Mexican trade officials will convene in Montreal to begin the sixth round of talks to renegotiate NAFTA – a deal that Trump has opposed since his campaign for the presidency and which on Thursday he described as “a bad joke” on Twitter.

Retired Canadian diplomat Colin Robertson remains uncertain about the future of NAFTA, which he helped draft.

“If we were dealing with any other administration, I would say yes we would solve the differences. But because of Donald Trump, I don’t know. On a daily basis, you wonder where he is coming from,” said Robertson.

He said the U.S. president has recently sent mixed signals regarding Mexico, where he told the Wall Street Journal that he would be “flexible” on his threat to withdraw from NAFTA in light of this year’s Mexican presidential election, yet also said that Mexico would pay for his much-promised U.S.-Mexico border wall “indirectly” through changes to the trilateral trade pact.

Beatty said that during negotiations for the 1988 bilateral trade deal between Canada and the United States that preceded NAFTA, the dynamics that played out between Ottawa and Washington, D.C. were “quite different” of what they are now between both capital cities.

He said there was “a very close personal” friendship between U.S. President Ronald Reagan, a Republican like Trump, and Canadian Prime Minister Brian Mulroney, a conservative in whose cabinet Beatty served at the time as defense minister.

“Without that relationship, the Canada-U.S. Free Trade Agreement wouldn’t have been possible because there were so many vested interests that worked against trying to take down barriers and open up trade,” Beatty explained.

“In this case, we have an existing agreement that by any empirical standard has been very beneficial to all three countries. Logic would say you need a compelling reason not to continue with it. Yet what we’re dealing with here is a politically and ideologically driven approach to trade that often ignores the facts.”

Robertson, an Ottawa-based vice-president of the Canadian Global Affairs Institute, a foreign policy think-tank headquartered in the western Canadian city of Calgary, noted that Trump and Canadian Prime Minister Justin Trudeau will be in Davos, Switzerland next week attending the World Economic Forum where NAFTA will likely be raised in any conversations between both leaders.

But ultimately the hard work will occur at the negotiating tables, and Robertson believes there are three possible outcomes to next week’s talks in Montreal, which have been extended by one day to Jan. 29.

Either a deal will be reached and sent to the U.S. Congress for approval; or negotiations will be suspended at the end of March following their eighth round in Washington, and moved to technical discussions without ministerial meetings until 2019 after the Mexican presidential inauguration on Dec. 1; or Trump rescinds the agreement and U.S. Trade Representative Robert Lighthizer “will blame Canada and Mexico for failing to show a willingness to compromise,” according to Robertson.

The latter scenario is plausible since neither Canada nor Mexico is willing to budge in their insistence that a NAFTA provision that allows for bi-national panels to review anti-dumping and countervailing duties remain. Trump’s administration wants that dispute-resolution mechanism dropped and have U.S. courts as the final arbiter in challenges to American tariffs.

]]>http://www.colinrobertson.ca/?feed=rss2&p=20720Make or Break for NAFTAhttp://www.colinrobertson.ca/?p=2061
http://www.colinrobertson.ca/?p=2061#commentsSat, 20 Jan 2018 00:07:40 +0000http://www.colinrobertson.ca/?p=2061News Analysis: Make or break for NAFTA at next week’s talks in Canada

Source: Xinhua| 2018-01-20 06:34:12|Editor: yan

by Christopher Guly

OTTAWA, Jan. 19 (Xinhua) — The Canadian Chamber of Commerce is suggesting the more than 200,000 companies in its network renew any permits required to do business in the United States sooner than later in case U.S. President Donald Trump’s administration scraps the 24-year-old North American Free Trade Agreement (NAFTA) between Canada, the United States and Mexico.

“We all live in hope that common sense will prevail at the end of the day,” chamber president and chief executive officer Perrin Beatty, a former Canadian cabinet minister, said in an interview with Xinhua Friday.

“However, we’re dealing with an administration that is very nativist and that is talking about putting impediments in the way of trade, which is not what we’re doing in Canada. We see engaging American businesses as a positive thing.”

Next Tuesday, American, Canadian and Mexican trade officials will convene in Montreal to begin the sixth round of talks to renegotiate NAFTA – a deal that Trump has opposed since his campaign for the presidency and which on Thursday he described as “a bad joke” on Twitter.

Retired Canadian diplomat Colin Robertson remains uncertain about the future of NAFTA, which he helped draft.

“If we were dealing with any other administration, I would say yes we would solve the differences. But because of Donald Trump, I don’t know. On a daily basis, you wonder where he is coming from,” said Robertson.

He said the U.S. president has recently sent mixed signals regarding Mexico, where he told the Wall Street Journal that he would be “flexible” on his threat to withdraw from NAFTA in light of this year’s Mexican presidential election, yet also said that Mexico would pay for his much-promised U.S.-Mexico border wall “indirectly” through changes to the trilateral trade pact.

Beatty said that during negotiations for the 1988 bilateral trade deal between Canada and the United States that preceded NAFTA, the dynamics that played out between Ottawa and Washington, D.C. were “quite different” of what they are now between both capital cities.

He said there was “a very close personal” friendship between U.S. President Ronald Reagan, a Republican like Trump, and Canadian Prime Minister Brian Mulroney, a conservative in whose cabinet Beatty served at the time as defense minister.

“Without that relationship, the Canada-U.S. Free Trade Agreement wouldn’t have been possible because there were so many vested interests that worked against trying to take down barriers and open up trade,” Beatty explained.

“In this case, we have an existing agreement that by any empirical standard has been very beneficial to all three countries. Logic would say you need a compelling reason not to continue with it. Yet what we’re dealing with here is a politically and ideologically driven approach to trade that often ignores the facts.”

Robertson, an Ottawa-based vice-president of the Canadian Global Affairs Institute, a foreign policy think-tank headquartered in the western Canadian city of Calgary, noted that Trump and Canadian Prime Minister Justin Trudeau will be in Davos, Switzerland next week attending the World Economic Forum where NAFTA will likely be raised in any conversations between both leaders.

But ultimately the hard work will occur at the negotiating tables, and Robertson believes there are three possible outcomes to next week’s talks in Montreal, which have been extended by one day to Jan. 29.

Either a deal will be reached and sent to the U.S. Congress for approval; or negotiations will be suspended at the end of March following their eighth round in Washington, and moved to technical discussions without ministerial meetings until 2019 after the Mexican presidential inauguration on Dec. 1; or Trump rescinds the agreement and U.S. Trade Representative Robert Lighthizer “will blame Canada and Mexico for failing to show a willingness to compromise,” according to Robertson.

The latter scenario is plausible since neither Canada nor Mexico is willing to budge in their insistence that a NAFTA provision that allows for bi-national panels to review anti-dumping and countervailing duties remain. Trump’s administration wants that dispute-resolution mechanism dropped and have U.S. courts as the final arbiter in challenges to American

As negotiators head to Montreal next week for the sixth round of negotiations, here’s an overview of the issues in play.

BY SAMANTHA WRIGHT ALLEN

Last week, trade observers could be forgiven for feeling whiplash after reports swung from Canadian advisers expecting an imminent United States withdraw- al from NAFTA to U.S. President Donald Trump musing negotia- tions could continue past Mexico’s July presidential election.

The fifth round of negotia- tions in November was supposed to be a ministerial meeting, but was a dialled back to technical discussions after an acrimonious fourth round saw the Americans present several non-starters from the Canadian perspective—what Canada’s chief negotiator Steve Verheul told Parliamentarians last month were“extreme proposals.”

While there is“emerging agreement”on the less controver- sial ideas, like updating NAFTA for the digital age, the status of five issues commonly referred to as“poison pills”remain anyone’s guess, said John Weekes, Can- ada’s NAFTA negotiator from 1991 to 1994, who currently sits on a government advisory panel alongside other trade experts.

“This is seen as a bit of a make- or-break session,”said Mr.Weekes, noting Canada’s initial negotiating position appeared to be that the poi- son pills were so unacceptable, they weren’t prepared to engage.

Here is a list of the trade is- sues still in play:

The poison pills

Autos, rules of origin

The America First approach of the U.S. administration is perhaps most apparent in its fourth-round demand that 50 per cent of con- tent in vehicles be U.S. based in order to cross borders tariff-free. It also raises the NAFTA-country content to 85 per cent from the current 62.5 percentage require- ment in vehicles travelling duty- free between the three partners.

Before a House committee in the fall, Mr.Verheul told members the plan is“wholly unworkable.” The proposal has also been re- jected by Mexico and panned by that country’s auto lobby.

Insiders say Canadian indus- try—especially big auto and big la-

bour—are in line with the govern- ment, pushing against the U.S. ask. Unifor president Jerry Dias said agreeing would be the “death knell of so many different industries” and that on NAFTA content, Canada could live with 75 per cent but will “never agree” to half American.

But Mr. Weekes said he wouldn’t be surprised to see Canada counter with“practical changes”to rules of origin given the tracing list cov- ers components that are no longer found in cars and fails to cover items invented in the last two de- cades. The Globe and Mail reported last week Canada’s negotiating team is working on a proposal to increase the amount of North American-made content to address the contentious American ask.

The auto trade is probably the best example of North America making things together, said for- mer diplomat Colin Robertson in a Canadian Global Affairs Institute primer prepared for the Montreal round, because “building auto parts and components … rely on supply chains that crisscross the borders.”

For example, Ontario-based Magna employs 62,000 Ameri- cans, 22,000 Mexicans—far more than the 20,000 Canadians.The CEO has dubbed the proposal a “lose-lose-lose”situation for North American car companies.

Supply management

Canada’s supply management system has been a no-go zone in trade agreements, but the NAFTA negotiations nevertheless squarely centred the hot-button issue. For decades Canada’s protectionist approach has set quotas and prices for local farmers, controlling the supply of milk, eggs and meat from turkeys and chickens. It tacks a 270 per cent duty on imports out- side of set amounts, an approach Mr. Trump has targeted as “very unfair.” Under his hand, American negotiators have called on Canada to eliminate those tariffs and the controlled flow of goods.

Steve Verheul, chief negotiator for NAFTA with colleague Dany Carriere appeared before the

House Standing Committee on International Trade in December, updating Parliamentarians on several proposals he considered ‘unworkable.’

The Hill Times photograph by Andrew Meade

P.E.I.) and Foreign Affairs Minister Chrystia Freeland—have held firm, with the Ms. Freeland (University- Rosedale, Ont.) telling a committee when negotiations launched last summer, Canada is“fully commit- ted”to saving supply management, making it part of her first speech on Canada’s NAFTA objectives.

Canada faced some of the tough- est farm lobbies in Europe, yet still emerged with both the Canada-EU Comprehensive Economic and Trade Agreement (CETA) and the supply management intact, noted Earnscliffe Strategy Group principal Paul Moen, a former Liberal trade adviser. There was some movement, however, with an increase of 16,000 tonnes of duty- free fine cheeses and 1,700 duty- free tonnes of cheese marked for industrial food processing cheese, so observers say something similar could be on the table with NAFTA, but only in the context of toned- down expectations from the U.S. And, if any further quota erosion is offered in NAFTA, Mr. Moen said to expect an assistance package (like the Conservatives offered to coun-

Canada’s agriculture lobby is actively pushing Canada to hold its ground, with groups like the Dairy Farmers of Canada and Chicken Farmers of Canada regu- larly in the mix. Canada’s chief agricultural negotiator Frédéric Seppey is granting regular meet- ings, with 181 communication reports filed to his name with the lobbying commissioner’s office over the last year, compared to 184 for Mr.Verheul.

Sunset clause

An automatic NAFTA five-year renewal by positive agreement from the member countries—or a sunset clause—has been panned by Mexico, Canada and industry stake- holders for the uncertainty it would create for cross-border business.

Mr.Verheul in December said the U.S. proposal is“a rather large concern”and the three“can’t have an effective agreement”if it could expire, noting that businesses need a“fairly long horizon”to plan their investments.

“[A sunset clause is] going to put a significant chill on invest- ment, on planning, and on the strength of the agreement.”

Mr. Weekes said there could be a way to engage with the proposal without ever consider- ing it as an option. Canada could counter with a softer option that encourages ongoing reviews to update the deal, investigate how it functions—which he thought the countries should have done more following the first NAFTA.

“Part of the reason we got to this point was political neglect, and particularly in the United States, and then it became fash- ionable to badmouth NAFTA when you were running for an election. It’s not surprising that a strong constituency developed

at the grassroots level,”said Mr. Weekes, noting it wasn’t just Mr. Trump who would talk down NAFTA; both former president Barack Obama and Democratic nominee Hillary Clinton took some issue with the agreement.

“They all campaigned on the need to change or reform or get rid of it.” He said he believes the coun-

tries should have been doing“a lot more”over the last two decades and that committees were origi- nally set up with that in mind.

“I thought [review] would hap- pen but it hasn’t really happened,” he said.“We don’t want a sunset clause but I think it would make a lot of sense to have regular politi- cal supervision to make sure the three countries are living up to their obligations.”

Dispute settlement

Also in dispute is NAFTA’s approach to dispute resolution, with Mr.Trump taking aim at the agreement’s approach, preferring all matters be dealt with by the U.S. trade remedy system.

Chapter 19, which deals with countervailing duties and anti- dumping, is“vital to Canada and Mexico,”said Mr. Robertson be- cause there would be no recourse otherwise.

“If we don’t get that, then we’re simply at the mercy of the American trade remedy system which we think is unfair.” Mr.Verheul told the House International Trade Committee in December the chapter has been “an effective instrument” for Can- ada, which has taken up 20 cases over the years leading to the U.S. changing its practices 13 times.

But several suggested it’s a phil- osophical debate at heart, and that Congress should reign supreme.

Ms. Freeland said in August Canada wants to reform the Investor-State Dispute Settlement process, or Chapter 11, which protects Canada’s ability to pass public interest regulations with- out the fear of corporate legal action. Canada is going after a CETA model where set judges adjudicate matters rather than ad- hoc appointees.

It’s seen the most pushback from American companies and Canada is already a target, facing more Chapter 11 lawsuits than any other country, according to a Globe and Mail report.

During the first NAFTA nego- tiations, Chapter 19 was almost a deal breaker, and insiders say it’s still a red line Canadian negotia- tors won’t cross.